The ‘Europe’ sculpture of Belgian artist May Claerhout showing a woman holding up the symbol of the Euro stands outside the European Parliament building

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The U.K. government has launched a legal challenge to the financial transactions tax proposed by 11 European Union countries due to concerns the levy will negatively impact on member states that have chosen not to sign up to it, Chancellor of the Exchequer George Osborne said Friday.

The U.K. submitted the challenge with the European Court of Justice Thursday–the deadline for legal challenges to the European Commission’s proposal on the tax–but the country remains hopeful it can reach agreement with the 11 countries without having to pursue the matter through the court.

“We are not against financial transactions tax in principle,” Mr. Osborne told reporters in Washington. “But we are concerned about the extra-territorial aspects of the commission’s proposal for the tax and I think that concern is shared by some other countries.”

The 11 countries–France, Germany, Belgium, Estonia, Greece, Spain, Italy, Austria, Portugal, Slovenia and Slovakia–agreed in January to introduce the controversial tax proposal via a procedure known as ‘enhanced cooperation’, which allows a group of at least nine countries to move forward on proposals without requiring the participation of all 27 member states.

The aim of the transactions tax–which could raise as much as €35 billion ($47.3 billion) a year for the 11 participating states–is to ensure that banks make a contribution to covering the costs of financial crisis and to damp excessive trading with a view to avoiding a repeat of 2008.

But the U.K., alongside Luxembourg, Malta and the Netherlands, all of whom have highly-developed financial centers, opposed the tax, on the grounds that it could damage their competitive position vis-à-vis other centers outside Europe.

A person familiar with the matter said the U.K. is concerned the tax would distort growth, and would hit savers and pensioners.

The U.K. is also concerned about the extra-territorial aspect of the tax, which would see it apply to some financial transactions conducted outside the 11 countries.

The person said the U.K. had held constructive talks with the 11 countries–in particular Germany–and remained hopeful that the proposal could be altered to allay Britain’s concerns without having to pursue the matter through the court.

MoneyBeat has a blog on what the Financial Transactions Tax actually means here.